FET - Earnings call transcript Q3 2020 | Forum Energy Technologies, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Q3 2020 Forum Energy Technologies, Inc. Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your host, Mr. Officer. Financial Chief Williams, Lyle Sir the is yours. floor

David Williams

our Executive you, Technologies' yesterday, it Third Good today President Chris and of on and Executive issued is Lux, Call. after morning, Energy Forum are the Chief Chairman Forum's earnings to Operations. welcome Gaut, and Quarter Vice and website. me Neal our Thank With Lara. Officer; our XXXX release We Conference Earnings closed market available

Before listeners we regarding we would caution statements. begin, to like forward-looking

historical than protections other Please information include SEC other law. Form contain the may today that our on statements considered harbor Management's remarks we filings. many that safe All be affect our relying XX-K of business, afforded information. along financial are the should Our non-GAAP may measures. note federal context including with in factors in such those the remarks by disclosed

reconciliation For website. call call and Chris. being recorded of refer release. be over earnings on measures, of will This a turn to the is will call now available replay these a to our the I our

Christopher Gaut

and increase operating XX%. cuts to note that just cost to were lowest second we is Also, activity. able drilling our flow. up upgrade XXXX the their and outside level products see was our Lyle, We quarter able year count in from morning. to service through the It third latter believe to now the in bookings drilling of free in was third related companies bottom further good cash the drilling part decline XX% quarter drilling completions activity our to revenue business The our and resulting rig and and limit to directly on levels and increase Most completion short previous our oil important of in this down oil Despite completion and in collapse, America U.S. and We began the replace the service X% to sequentially revenue sequential generate Forum are QX, are from an over in was in the the rebounding. operations. XX% Thanks, service activity as X% orders Forum's to record. to clearly North cycle from is sustain, an improve the EBITDA positive and third of quarter quarter. our was selling efficiencies results

put We expect increase a our equipment to and inbound strong work. in customers as orders in QX our back

our well new also participating activity non-oilfield orders QX revenue incremental in for These Forum will in increased equipment bookings QX drive in as and the We subsea for in higher with margins. Asia impressive are the business. QX as Middle East and

since dramatic made in our began of these XXXX. efforts beginning cost we the progress at have reducing We structure

is XX% significantly XXXX down undrawn. facility costs, the on period have ABL of we our excluding to almost over am we as our Our overhead are and our credit materials our structure reduced cash liquidity the maturity August, and costs, extended position. pleased expense. progress our debt In with I bonds XXXX, our from this also

the positioned the levels in activity completions is recently. Forum experienced in to from unsustainably benefit and drilling recovery Lyle? low

David Williams

Thank Chris. you,

efforts. balance During see our we we to the and the the benefits cost begun sheet, transformed have significant quarter, of reduction company's

are the a Subsequent third XXXX of notes, we a At XXXX notes convertible new October notice the let exchange of to foreseeable a the quarter, retired, to First, me the the ABL we of the of to XXXX. the credit these structure. $XX quarter, of extend robust recovery. liquidity the cash sufficient will speak par operating be future, maturity our call remaining liquidity. end the market maturity majority redeem notes we beginning to facility par to for $XXX the million fund in our million quarter, of should In of had third made for completed to the This to our improvements capital extending needs even successfully notes. XXXX. issued for When

we reverse ratio trading will addition, and We announced stock split, higher at the trading that stock November NYSE's Tuesday, XX, higher begin we'll trading the and a compliance into In the anticipate requirements. X-for-XX new Forum bring price. prices next with

we million reductions, over include the in $XXX in we respect $XX in the the reductions Second, the and quarter are of I increased reduction beginning benefits quarter seeing. nearly of significant quarter annualized want to $X in costs despite $XX Since million a cash million, by EBITDA the cost cost reductions XX%. XXXX, third million highlight Because these These alone. during have of reduced the progress revenue.

cover about leaner are pleased we in only With cost results, take for or is these our our $X.XX lays U.S. million, leaner Net We activity, a This our a of improvement for additional and transformed from quarter Forum's breakeven us recovery for a historical level market structure company from share benefit actions in of believe following breakeven rigs context, long In diluted activity can foundation with revenue. for structure Forum's a the let industry market for modest to expectations sheet balance of high loss ultimately XXX gains cost savings the levels results $XX increased. reduction and was working reductions, summary, the this quarter. our the and runway these we quarter. levels a me with per activity Forum EBITDA While achieve compel to that the significant earnings revenues success provides fourth lift share. at torque on when cost

items gain $X share. million exchange diluted $X.XX from of adjusted and debt, of items $XX include ongoing earnings assets cost foreign income as provided charges. reduction is reconciliation certain complete special of A losses, of release efforts per other special of resulted reference. as in loss net operating million was and and extinguishment on well leases your restructuring impairments million The $XX a net for Excluding our

cash $X in was from receipt quarter net Proceeds of certain interest CARES the Our in capital loss paid $XX capital benefited disposition from million the $X was flow which carryback by offset net the generated the million. of third under assets, third capital of in allowed of cash Act, million We quarter. quarter. tax the expenditure free of expenditures, cash the of million $X after partially

We expect asset dispositions cash quarter, of again be to a the fourth a sales. of the ongoing in completion source property pending few

expect Excluding to from generated working benefit, the net in decreases capital million we and tax continue. of capital working our reduction $XX

compensation was and $X quarter, quarter, and flow to our million $XX million, in cash once Interest exceed For expect and were third the million fourth respectively. EBITDA. we and amortization expense stock-based $X the free again depreciation

to them similar expenses the fourth $X million these the expect be modestly in quarter, levels third We we expect were corporate fourth expenses remain and up to the at quarter. in quarter. Adjusted in

continue debt be not million an continue we in where $XX but at to million recorded some we expense, a we facility to an expense and million in of tax XX% million reduction to international sheet is use estimated the are our our relatively debt $XXX tax comprised rate we of XXXX notes This loss-making the debt profitable decreases that balance related discount $XX decrease debt, a recognize We the as amortized par. million exchange. fair of interest face loss-making, new a for shows in life have losses. ABL of debt Once full additional The costs primarily extinguishments for have tax of jurisdictions, non-cash the will low under comprised issuance expense net we The currently credit jurisdictions are as the rules turn discount recognizing $XX loss, the expect income. notes. our operating additional debt jurisdictions some $XX net repayment and a benefits tax despite the as issuance to overall sequential to of long-term accounting additional begin of debt with discount value discount costs. over debt and borrowings on The reflects related to

For of gain recorded payments early in bondholders of discount The and statement was million our significantly detailed debt decrease & million on the in are to participation income the results relates $XX just the demand the made to meaningful on Drilling Since for release, highlights casing $XX a the debt difference our clarity segment purposes, million $X.X exchange. earnings extinguishment the in debt in impact sequential during U.S. hardware drilling I impacted. as had few segment here. construction a will Downhole share activity drilling well rig XX% and between components

rig seeing market of product anticipate we in count has green offerings However, revenues are August. share, Permian bottoming rigs about are forward. in improve growing these making we drilling in strides as by after teams going increased sales to Basin families, XX already these our Furthermore, product our and activity shoots

declines revenues quarter, revenues gas defense industry the sustain line subsea oil development, the existing in continues has and recognized offshore of subsea execution subsea based offshore Our penetrate revenue ongoing helped the In overall backlog. which to lower on product the and on wind despite declined spending.

his products lift in are increase Neal for on The spot U.S. the in family more a revenue the Completions our segment. additional for saw prepared quarter. products products well well to these activity a will and in color increase remarks. completion segment. activity, completion this bright tied benefited provide these also important artificial Demand product is and in background XX% Our we for

and to their coiled As We items. consumable punting, our back wireline saw large wireline in service replacement our and company customers Enviro-Lite work, in fleets as increase work. increased products put in the revenue back also they for which on our the put consumable pressure products, tubing for wireline spending increased services of greaseless to customers' a their increases in items cable efficiency quarter stimulation Demand customers replaced particular, our assets operations. to

product were the Permian quarter the to decrease reduce our for costs gas significantly and slow in negatively distribution by negative product to line compounded of underlying almost slowdown Orders inventory strengthening production quarter in orders just the and with customers the meaningful completion took customers feel This up to increase in across in Production in the shipments in That in increased midstream in transitory and due shipments channels. activity line in our placed for revenue product impacts of despite to product and downstream basins. that commitments the believe segment, decisive the ultimately valves drilling increase. primarily were action valves distributor is team continued valves customers will down, our were in Finally, the to U.S. a in the focused Orders, future and oil basins. We demand, equipment line business the line Mid-Continent every increase reductions in markets drilling our in be the Revenues have said, part activity activity actually revenue. impacted. as and however, both we completions consistent in seen and underlying as by destocking the EBITDA

turn to let Neal call our operating key Now the over some me initiatives. to of discuss

Neal Lux

you, Good morning, Lyle. Thank everyone.

quarter experienced Thank into challenges we and As company employees. I head the responded have you. Forum's society, industry we has resolve, determination. with want final within monumental. our difficult Forum year, have The been and The to team of incredible persistence recognize a

during and bit. trends the and Looking frac between in during market than bottoming back QX, at U.S. drilling QX, more diverged After has activities a the the completion doubled. activity

contrasts low premium less quarter-over-quarter. We demand that This point. halfway construction the and divergence has production-focused GPU. drilling to natural this trend the while products While base, solutions for far lag. but which tied and from wireline in gas increase includes increased bottomed and Forum's count, drilling well increased coiled the drove very our U.S. solutions well bookings through for They completions. rig cable, DURACOIL Enviro-Lite, tubing, was our completions-focused from products significantly greaseless quarter a saw that This with

as solutions especially We equipment in the these service. fourth expect growth quarter, to back customers see into further for bring

our characteristic of Multilift types comes management Forum are almost witnessed marketed that sand to Another our artificial of our the increased not Solutions. line mitigation is pump. product lift was is life SandGuard, the Demand certain that offering, customers' a protection and These all work from on workovers. this that ESP part offers This quarter artificial systems system production. new SandGuard tied by management, demand line gas solutions which a in lift of in extend sand cable and of program. and as is driven great it Also, lift completions artificial brand of

In XX% into older our wells. go producing fact, of about sales

of of generates strong results drilling completion the Forum regardless activity. and level Multilift Solutions

slowed travel the monitor COVID-XX and completion and due Another trend the This restrictions. of to activity equipment Middle is continue during in drilling QX East we bit buildup Asia. a to

our will significantly companies, board. operations. premium However, tubing. drilling revenue we This to blowout the local in QX activity drive Shifting service side, national providers resume cost expect across companies reduced mud X expenses to recover Middle as we pump East the have and oil and handling bookings for consumables, and Big coiled preventers tools, the

reduced As Chris XX% since mentioned nearly and our costs their remarks, Lyle been cash in year. by have have last

in be taken drilling expected is average an However, where to and costs U.S. the count XXX to need business. rig year, next units between out environment XXX more of

continuing to review products. portfolio are We of our

We even economic of number that These to through products differentiated have competition, value are significant generate activity. our the a profit of deliver at cycle. next also levels low grow customers, and they will substantial strongly products with limited they

current expenses cost products We and next the will that to level of market products in continue profitable significantly expected we technology to develop share. activity for take these Concurrently, not new to structures. invest are will their year, reduce additional with given

actions significantly will annual expenses. will closing back leverage. complete, of are potentially million exit and will of After $XX now the expected our million be remarks. EBITDA call to lowered additional $XX eliminate to enhanced over are these actions to completed an our have breakeven will for I Chris and by these and These continue certain turn We we and products. early have consolidate simplify, XXXX operating currently to begun

Christopher Gaut

occur can to Neal. it several This their could we behind oil stoppage worst sudden a driving and in than for time they turned levels. our the drilling XXXX revenue sustain Forum, up levels? try low QX. been which QX rig has oilfield so precondition production is necessary a Who the oil is gas for is in new the have in completion reasons. year and record But activity, U.S. resulting their an market years. to looking to predicted has gas the from so to up better increase, Operators At prices What quarters. oil perspective. the for in expect Meanwhile, first negative Thanks, to us many count in activity our ramp in begun orders have

begin levels a will activity results to show recover, improvement. Forum's As direct

the We at in EBITDA as $XXX also million to be margins XX%. to expect QX our exceed revenue high our as sequential generated and we incremental least expect QX,

our and our sustainable structure, the With fund position have we resources the recent changes to now financial cash a growth. debt to

at the the and Thank Our cost efficient line activity much at in means much than completion point, attractive a open an Forum. will for interest more of you earnings achieve for we will structure level we level in drilling questions. lower past. your this Lara,

Operator

Instructions]. [Operator

first will from Your come Dan from of question the Pickering line Pickering Energy Partners.

Daniel Pickering

front. by I debt runway. on on a you all of lot saying guess I'll congratulations herculean start the progress effort. was a looks gives That it And it the like

Question associated of the at, something that I $XX fairly Do breakeven So various so comment? million required in about reduction is that. in EBITDA the a lowering $XX you That's to about around congratulations think number to on this breakeven efforts comment. in some another significant incorporated that expenses talked you would annualized mentioned U.S., that be, Neal, think, in with expenses, Is lines. was million we to do rigs the product or your we rigs. that - XXX number get

Neal Lux

the we savings included Yes, XXX that we're that the - breakeven to costs rigs. going Dan. to in of cost going take additional take Hi, out put is estimate the out were our business of for that additional

Christopher Gaut

increase breakeven and or do that the any that and would assuming leverage like more. from we along point effort And the what operating we're help market standpoint can. not lower part it's even that eventually of pricing in our something So to continue come a to improvement

Daniel Pickering

today, on you're orders or or those about profitability QX in or same? can we we look Sure. the where of QX compared year? the been what talk might have you better like worse, Thank orders when you. looks that Is to taking this margins at And then it

Christopher Gaut

change And in we're things we low. trying today's have that product from just that of we've margins even such Yes. our I mean, this the products a completions margins others, had portfolio, are significant market. those the market line. upturn have we here, Dan, within activity, don't our take I the put one low resources as product is benefiting the advantage have But lines what and a such we margins think it's have to that strong do across the near-term benefit of area. in is behind very these think margins product will given have the recovery, of the financial higher we're trying that will drive in High-margin to lines performance.

Daniel Pickering

Great. one And last re-queue others ask one and and I'll then let questions.

capital to in an you. continues increase for working Your cash flows be

remarks and continue. to you I of million up? sustained? You're indicated think of to order we out million working that able in $XX improve you of be much inventory. the can think taking think do quarter expect kind we how tick a and Any of capital expect and to magnitude? And might be You between in trend receivables somewhere prepared Do that see you to revenues that $XX given XXXX, activity sort

David Williams

Dan. question. This Good is Yes, Lyle.

at areas and some down inventory activity of part would to a we think and as some accelerate. bit a little that need point, we slow at over to an the certain revenue orders to lighter. key begin past then reduction. up nice up, we're we'll So We I see a done The job grow. inventory do capital to begins headwinds building accounts to working one think side of opportunity of as team's begin is and revenue the our really significant receivable on as we quarters, in still bunch revenue in the the the reducing recovery where of have pick of and have would that least initial continue inflect continue And business build

level cash higher. cash conversion to can will we a be provide continue have continue source flow think so above we that EBITDA of and our So that

Christopher Gaut

the cash offset source should And the in inventory receivables, Yes. build of yes.

Daniel Pickering

at a but neutral net terms in net cash So of worse, positive probably impact.

Christopher Gaut

Thank wrap a And and the Yes. interest, spending for, capital I you in quarter. Thank very requirement, the talking here. of us are capital much. we're then, we contributor. planning next very everyone you, appreciate And That's we course, way that'll Well, growing think as good. CapEx. our what forward Great. yes. up Lara, little of EBITDA we very light; And Dan. to look to

Operator

you Thank everyone so thank presenters, Thank participating. for you, and concludes This today's you sir. conference. again, much

day. have now disconnect. lovely Stay a may You safe and

Forum Energy (FET) 6 Nov 202020 Q3 Earnings call transcript